Please enable JavaScript.
Coggle requires JavaScript to display documents.
Business combinations (Acquisition related costs are costs the acquirer…
Business combinations
Businesses do not only grow organically. They often purchase other businesses, to complement their existing operations, add to their market share or one into new areas of activity.
IFRS 3 does not apply to the acquisition of anything other than a business. An entity must determine whether a transaction or other event is a business combination by applying the definitions in the standards, which requires that the assets acquired and liabilities issued constitute a business
If the assets acquired are not a business, the reporting entity should instead account for the transaction or other event as an asset acquisition
IFRS 3 does not apply to transactions under common control, for example when one subsidiary acquires another subsidiary from its parent, nor does it apply to the formation of joint arrangements
IFRS 3 requires all business combinations to be accounted for using the acquisition method. This involves
-
-
Reconsiing and measuring the identifiable assets acquired, the liabilities assumed and any non controlling interest in the acquiree
-
There must always be an acquirer in a business combination. In most circumstances this will be easy to determine as one entity buys another using cash or its own shares as currency, but in other situations such as when two entities come together that are of roughly equal size to pool their resources, it may be difficult to determine the identity of the acquirer
-
The acquisition date is the date control cases which will often be the date of the legal transfer of consideration
At the acquisition date, the acquirer must recognised, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non controlling interest in the acquiree
Once all the acquired assets and liabilities are identified, they are then measured at fair value as at the acquisition date. The consideration given for the purchase is also measured at fair value at the acquisition date, including any contingent consideration
The difference between the fair value of the consideration given and the fair value of the identifiable assets and liabilities is goodwill where the consideration is higher than the value of the assets and liabilities acquired. Where the consideration is lower, this is a bargain purchase and the gain is recognised immediately in the statement of profit or loss
Acquisition related costs are costs the acquirer incurs to effect a business combination. Those costs include
-
-
-
-
-
-
-
The acquirer must account for acquisition related costs as expenses in the period in which the costs are incurred and the services are received except that the costs to issue debt or equity securities are account for under the relevant financial instrument standards
After acquisition, all assets are depreciated or amortised as required by IAS 16 and IAS 38.
-
-